There are a ton of misconceptions about pawn shops out there, so let’s get some things cleared up. Check out the most common myths about pawn shops, debunked.
- Pawn shops deal in stolen merchandise. Pawn shops have laws, are specially licensed and cooperate with police to stop the selling of stolen merchandise. In fact, they give a list of all merchandise received with serial numbers to the police so they can compare them against records of stolen merchandise. This means that anything stolen can be recovered and returned to the owner. Why go through all of this trouble? They could be charged with selling stolen merchandise!
- Pawn shops attract sleazy undesirable customers. Here are the facts: the typical pawn broker’s loan customer is employed, lives within a few miles of the store and occasionally needs short-term cash for unexpected bills such as a medical expense or car repairs. Customers don’t look to pawn shops because they lack income, but rather they lack personal savings because, let’s face it, we all need some financial help at some point in our lives. Those who buy at pawn shops are your typical bargain hunters. They prefer not to buy retail when they can get the next best thing at a lower price.
- Pawn shops are unregulated. Pawn broking is actually a heavily regulated business. In fact, at the local or state level, most pawn brokers are required to be licensed and regulated. At the federal level, they follow rules from the Bureau of Alcohol, Tobacco and Fire Arms and are regulated by the Federal Reserve Board almost in the same ways as banks. They are also required by the Patriot Act to check all customers against the Treasury Department‘s database of known terrorists. Bet you weren’t aware of all of that!
- Pawn shops are the last resort for their customers. Customers find that loans from pawn shops are better than borrowing money from a family or friend. Plus, it’s quick, confidential and a customer gets part of the value the pawnbroker believes the collateral would bring in if sold. Sure, the loan to collateral ratio varies depending on the type of goods pledged, but a loan of 30-50 percent of the resale of the collateral is pretty common.
- Pawn shops are obsolete and old fashioned. Pawn broking might be the oldest form of consumer credit dating back about 3000 years, and has remained nearly unchanged in structure but there’s a reason for it. Pawn loans are the only credit product that have ever been available that give the borrower short term cash, obligation free. If you think about it, no lending product can give borrowers this option as quickly and efficiently as a pawn loan. Pawn shops are constantly improving and updating their approach to lending, so they are far from old fashioned!
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